Marketing Module 8

New product development starts with the systematic search for new product ideas. This is referred to as _____.

Idea generation

Step 5: Performing Test Marketing

Test marketing is when a firm does just that: tests the market. After all the assessments and development has been done, and the prototype refined, the company might decide that it is necessary to test the product on a larger scale before doing a full product launch. A test market means that the company actually launches the product in a small area, including distribution, advertising, and sales support. The goal is to see how the product is accepted and whether it met the originally defined expectations. The company's goal is to learn from the test market and improve or change the product before its full launch. Although test marketing is a great idea, there are some drawbacks.

In a highly competitive shopping environment, the product __________ may be the best chance to influence consumers.

packaging

When consumers choose products based on a particular brand, they are choosing ______ products.

shopping

During the introduction stage of a product, sales growth ________.

is slow, but it will pick up in the next stage

Profits will be highest in which stage of the product life cycle?

Growth

Consumer services and benefits, product support and warranty, and product delivery is considered which product level?

Augmented

Brand Managers

Brand managers are expected to manage all the decisions necessary for a specific product line or company brand, including advertising, pricing and distribution, feature options, and more

Category Manager

Brand managers often report to category managers, who are responsible for managing all the brands in a certain category.

Step 1 Generate the inital IConcept

Nearly everyone has had an idea or series of ideas on how various products can be improved or invented. They might be something as simple as a new ice cream flavor, or something incredibly complex like a new medical imaging machine. Regardless, it's generally a long road from the idea to the launch of the new product. So where do the ideas come from? Sometimes they come from inside the marketing department itself. Marketers know a lot about the marketplace, the competitive environment, and their customers, both current and prospective. But ideas can come from anyone in the company. Ideas might come from the customer service people who talk to the customers, understand, and fix their problems. Ideas might come from the salespeople, the frontline of a company, who sell by understanding prospective customer needs. Ideas also might come from the engineers.

Step 6: Commercialize the Product

The commercialization of a product means that the company puts it into full production, trains the sales and customer service staff, prepares full-scale advertising and other types of support, and essentially launches the product. The marketing staff creates a sense of anticipation in the company as launch day nears. This might include holding an internal launch, first, to introduce the product to employees not directly involved in its design. The marketing staff may also conduct press conferences and product sample giveaways as a way to create excitement and get people talking about the product. The company might hold events in retail areas designed to demonstrate the product's benefits. There are limitless ways in which a company can prepare for the full commercial launch of a new product. Regardless, the idea is to create a sense of anticipation and excitement both inside and outside the company.

Which of the following is NOT a probable reaction to the decline of product sales and profits?

The company increases the product promotion budget

The length of a product lifecycle _____.

Varies depending on the product

Product Life Cycle

When a product is introduced, the company rarely earns a profit. During the growth stage, profits rise. Sales peak during the product's maturity stage, and then both profits and sales drop significantly during the decline stage.

Step 3: Define the business strategy

Defining the marketing strategy includes identifying the target market and its characteristics. Part of deciding on the target audience includes assessing the size of the target audience. The audience must be big enough to sustain the research and development costs associated with creating a new product. Defining the strategy also involves looking closely at competing products to determine how the potential new product compares. Why would anyone buy your product over what is already available? How does the product fit into the company's current product portfolio? In addition, during this phase, the company develops forecasts for market demand. This entails determining how much of the product is expected to sell. What has to happen to make the product profitable? Does the firm have the resources to create, launch, and support the product? What is the effect on the existing product mix of creating and launching the new product? Marketers consider these types of issues and questions during this stage. As with any stage, if the answers to the questions are not positive, the development of the new product may stop.

Step 4: Develop the Technical Aspects of the Product

During this step, marketers work closely with the technical and engineering teams to define design and production issues. During Step 3, the marketing team worked with the technical and engineering teams to help create projections; but, during Step 4, the work gets put into action from a technical perspective. Detailed discussions of processes and design take place, and it is likely that a prototype is developed and tested. Developing the iPad Take, for example, the iPad. The iPad did not merely roll off the production line. Several prototypes were created, refined, and redeveloped until the Apple marketing team believed the product was ready to go to market. Changes during prototype development may have included software adjustments to make sure the product is easy to use. These days, it is not just product function that sells, but design, as well. Design, however, does not take the place of function. These days, savvy consumers demand both: The product should deliver what it promises and it should be appealing to customers. Moreover, with a product like the iPad, it is likely that even before the first ones were launched, ideas were being developed for an iPad 2, iPad 3, and so on.

Decline Stage

Everything has a life cycle with a beginning and an ending, and a product is no different. Sometimes, products fade from the market before a company wants them to (possibly the result of newer and better products being available). Think of records, 8-tracks, cassettes, and CDs, which are now totally eclipsed by downloadable music. During the decline stage, the market shrinks, sales fall, and profits decrease. Companies have to decide whether to pull a product or to continue to invest in it. Remember that a company has limited resources, and marketers must decide what the best products in which to invest are. Choosing to invest in a dying product means that a new one might not get the support it needs. It is often for this reason that companies decide to pull the plug on a product.

Growth Stage

If a product makes it out of the introduction phase, when no profit is realized, it enters the growth phase, when profits increase and peak. During this phase, other companies recognize that the product is successful and they create their own versions of your product. Therefore, one of the most important objectives for marketers during this phase is to build brand loyalty with consumers. Marketers know that if they can achieve consumer loyalty, chances are greater that the product will have a long life and will beat out the competition. At this point, marketers may introduce other versions of the product with various features in an effort to grab as much market share as possible. Although cell phones have left the growth phase, smart phones, or phones with Internet capabilities, are likely to be in the growth phase for a while as consumers slowly upgrade.

Products purchased for further processing or to use in normal business conduct are referred to as

Industrial Products

Typically, the longest lasting stage of the product life cycle is the _______ stage.

Maturity

Introduction Stage

New products start their lives in the introduction stage. Keep in mind that this stage is truly for new products. It not only includes products that are new to a company, but also products that are new to the market. During this stage, usually only one or a handful of companies is producing the product. The company must spend vast time, effort, and money in research and development costs to create the product. It also has to invest a lot of money in advertising and promotional costs to support the product in the marketplace. The company may have to commission salespeople heavily during this early stage to offer selling incentives. During this time, there are no profits for the product because the company is recouping its costs. Many products never get out of the introduction stage. Either the company cannot afford to keep supporting the product (for example, when sales are much lower than expected or when consumers are not interested in buying the product). The failure rate for new products is high. The ones that succeed transition to the growth stage.

Which of the following is NOT a function of product packaging?

Open the product easily

At which stage of the product life cycle is the cost to the company the greatest?

Product Developent

Step 2: Developt the best ideas further

Regardless of where the ideas come from, the real challenge for a company is being able to distinguish those that have potential from those that do not. It is up to marketers to determine which ones have value and are worth pursuing. After an idea is deemed interesting, marketers often first think about how to optimize it into the best idea possible. Take, for example, the idea that someone may have of developing a new software product to help small, independent restaurant owners manage their business better. Maybe the initial idea for the product is to coordinate deliveries automatically based on the weekly demand for various dishes. When the marketers sit around the table and discuss the idea, they may consider linking the deliveries to seasonal menu items, as well. They may also discuss giving the restaurant proprietor links to specialty items that are not typically available. As the idea for the software is discussed, it morphs, changes, and is optimized. In other words, rather than taking the idea at face value, the marketing team will try to develop the idea fully. This is only one example. As an activity, next time you are with your friends, pick a product and discuss your ideas for how it could be improved. Be sure to discuss which buyers you are targeting because this helps define the product.

Maturity Stage

The maturity stage is the longest stage of the product life cycle. Consider Ivory soap. This product has been around forever and is readily available. During the maturity phase, sales peak and profits start to decrease. Firms have to offer more and more incentives to persuade people to buy the product. When we consider our Ivory soap example, if you are a loyal Ivory user, then you will continue to buy this brand. However, due to the vast variety of soap available companies often have special offers to persuade consumers to select a particular product over another. Why would you choose to buy a bar of Ivory soap when another company is offering a similar product that is cheaper and has a new scent? Price reductions, coupons, and two-for-one offers are all ways that companies make their products competitive during the maturity stage. However, these special promotions cost money and, in the end, shrink the profit margin. During the maturity stage, companies continue to adjust the product to keep it fresh and alive from a marketing perspective. This might be done by adding a new feature or just updating the packaging to make it look more modern and new. Can you think of a product that you have seen recently that has changed it packaging? Chances are that this product is in the maturity phase. Global expansion It is not uncommon for companies to aggressively expand their sales globally as products enter the maturity phase and profit margins shrink. Companies need to protect and grow their margins as much as possible, and selling the products in new countries can help promote business expansion.

Products that consumers buy frequently with minimal effort are referred to as _________.

convience products

A company has developed a new product idea, so the marketing team tests the idea with groups of target consumers. They present a paragraph to participants, describing the new product. Participants are asked if they would purchase and use this product. This is an example of ______.

concept testing

A basic and distinctive mode of expression is referred to as a _________.

style